The Financial Ombudsman Service (FOS) is a forum for resolving disputes between financial service providers and their clients. It has the power to adjudicate on certain types of disputes and award compensation. The types of disputes on which it has jurisdiction are wide-ranging and include improper financial advice (such as alleged over-gearing, margin calls and exposure to high risk investments), privacy and confidentiality, maladministration in lending and insurance policy cancellations.
The features of FOS include:
1. Financial service providers are obligated pursuant to the Corporations Act 2001 (Cth) to be a member of an external dispute resolution scheme (FOS is one of these schemes).
2. Following on from (1) above, the decisions that it reaches in relation to complaints presented to it are bindingupon the financial services provider but not binding upon the financial services provider’s client. This can give the client a “free shot” at their financial services provider, with the forensic advantage of evidence being exchanged, before potentially electing to commence legal proceedings if they are dissatisfied with the outcome.
3. FOS determines the disputes presented to it on the basis of what is “fair in all the circumstances” having regard to legal principles but also applicable industry codes or guidance as to practice.
4. FOS has the power to award compensation up to $280,000 per claim (each complaint can, however, controversially comprise many “claims”) meaning that FOS can potentially award very high levels of compensation to aggrieved clients of financial service providers.
5. FOS is not bound by its previous decisions or any rule of evidence.
6. FOS does not have any cost jurisdiction. The losing party does not pay the other party’s costs of the dispute (which is unlike the usual course in legal proceedings).